Goldman Sachs has seen its profits slashed in half after legal costs ate into the company's second quarter performance.

The investment banking giant saw net income plummet 49% from $2.04bn to $1.05bn (£1.43bn to £733m) – despite charging the highest fees since 2007 – with the fall being pinned on litigation provisions linked to the mis-selling of mortgage bonds.

Like many of its peers, Goldman is being probed by the US Justice Department about mortgage bond sales in the run up to the financial crisis, and is hoping for an imminent settlement.

The bank has set aside $1.45bn to pay for legal costs in connection with the investigation.

Goldman's investment banking division saw net revenues rise 13% to $2.02bn and the bank splurged $3.81bn in pay and bonuses in the quarter.

Lloyd C Blankfein, Goldman's chairman and chief executive, said: "We are pleased with our performance for the quarter. While uncertainty in the EU weighed on investors' level of conviction, many of our businesses continued to benefit from generally improving economic conditions and healthy client activity."